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Please find attached your Talbot Financial first quarter 2020 portfolio review to supplement your monthly account statements available from Schwab. The report provides a performance summary of your investment portfolio compared to the S&P 500 Total Return Index (“Index”), Talbot Financial’s benchmark, and lists your investment portfolio holdings by industry sector.

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In 2019, the U.S. equity markets benefited from a continued robust U.S. economy, the Federal Reserve lowering interest rates, and concerns over tariff wars dissipating. Talbot Financial’s benchmark for performance comparative purposes, the S&P 500 Total Return Index (“Index”) returned 9.1% in the fourth quarter of 2019, and 31.5% for the full year.

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The financial markets advanced during the third quarter amidst continued anxiety surrounding trade deals and interest rates. The S&P 500 Total Return Index (“Index”) returned 1.7% during the third quarter. The Index is up 20.6% on a year-to-date basis through Sept. 30, 2019.

Within Talbot Financial clients’ portfolios, Technology and Consumer Discretionary were the best performing industry sectors for the third quarter and the year-to-date periods. Both sectors continue to meet our disciplined criterion of balance sheet strength, return of cash flow and long-term secular growth.

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The stock market extended its rally during the second quarter as tariff fears eased and the U.S. Federal Reserve (“Fed”) signaled a willingness to cut interest rates. For the quarter, the S&P 500 Total Return Index (“Index”) returned 4.3%. Year-to-date through June 30, 2019, the Index returned 18.5%.

Second quarter investment returns were led by the Financials and Technology sectors. Talbot Financial client portfolios were overweight both industry sectors relative to our benchmark Index. In the Financial sector, we particularly favor the strength of certain banks’ balance sheets and the material amount of capital these banks are returning to shareholders through dividends and share repurchases. In the Technology sector, our view remains that we are in the early innings of long-term secular technology advancement propelled by cloud-based computing.

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The financial markets posted a striking start to the year with the S&P 500 Total Return Index (“Index”) rising 13.6% during the first quarter of 2019. The primary driver of the first quarter rally was the recognition that central banks are more likely to hold interest rates low for an extended period. Perhaps the biggest shift occurred in the U.S., where the Federal Reserve (“Fed”) modified its stance to rate neutrality.

The first quarter Index return of 13.6% marked the strongest quarterly return since the third quarter of 2009. All 11 S&P industry sectors had positive returns for the quarter. The largest gains were in the Technology, Industrials and Consumer Discretionary sectors at 19.9%, 17.2% and 14.7%, respectively. The lowest sector returns during the quarter were in Healthcare and Financials at 6.7% and 8.6%, respectively.

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